Some 75% of Fortune 500 companies have captive insurance companies, but a key challenge has always been efficiently reinsuring captives' risks, with the options mostly limited to Lloyd's of London or reinsurers based in Bermuda. Now the New York State Insurance Department, in an initiative promoted by Gov. David Paterson, hopes to change that by resurrecting a commercial insurance exchange first launched in the 1980s. That initial attempt failed because it didn't attract enough capital.

"This isn't a done deal yet," admits Michael Moriarty, deputy superintendent for property and casualty markets at the New York Insurance Department (NYID). "But we've been talking with hedge funds and private investment funds, and they like the idea of having a way to invest in insurance risk, which is not correlated with capital markets.

"We envision this exchange to be an exclusively high-end market, at least at the beginning," adds Moriarty. "It wouldn't be selling auto or health insurance, although companies that offer that kind of insurance could reinsure on the exchange."